Quick - before the chance disappears

A forecast is a forecast is a forecast, and who knows what will actually come to hand. But if anything like this reasonably educated guess fronts up, we're in for a couple of good years. Growth will be faster than the OECD average, inflation lower, unemployment well below the OECD's, and our fiscal books in much better shape. There are aspects of it that could be better - we don't have a great long-term future if unemployment is low mainly because we're all busy clearing up after the latest earthquake - but it would still be a pretty good outcome to bag.

What slightly disappoints me is that we may be missing an opportunity to make things even better. One of the OECD's recommendations in their country forecast for New Zealand is that, given that there is "considerable scope to improve infrastructure" - don't we know it - "Government planning should begin now to establish a pipeline of good quality projects, including to promote productivity-enhancing urban densification and to service the rapidly expanding housing stock".

I'd assumed that we already had the pipeline they're talking about - in fact, we are issuing progress reports (like this latest one) on a Thirty Year plan first published last year - so I'm not entirely sure what the OECD is on about. I hope there isn't a gap between what we've currently got in mind and what the OECD thinks we should be doing.

In any event, whatever we, or the OECD, have got in mind, we should have been getting on with it while the going was exceptionally good. There was the opportunity to finance infrastructure at all-time historically cheap interest rates: our 10 year government stock yield hit an all-time low of 2.12% in mid August, and there was a very good chance that we could also have got 20, 25 or 30 year bonds away at very sharp rates indeed while world markets were obsessed with the proverbial "hunt for yield".

We've missed the very best opportunity to fill our boots with exceptionally cheap financing and build useful productivity-enhancing stuff with it: our 10 year government bond yield has already risen to over 3% (3.07% currently), following the post-Trump rise in US Treasury yields. Even so, the rates are still attractive by historical standards. We should pull finger and get the hell on with it while the going is still pretty good.

No comments:

Post a Comment

Welcome to my economics blog

“The remarkable thing about economics is that once you've been exposed to the big ideas, they begin to show up everywhere … Economics offers insight into wealth, poverty, gender relations, the environment, discrimination, politics...How could that possibly not be interesting?” - Charles Wheelan, Naked Economics: Undressing the Dismal Science, 2002

"The soundest argument for markets ... is simply that, very frequently, they are the least bad of the alternatives. To paraphrase Winston Churchill's remark on democracy, markets are the worst form of resource allocation, except for all the others that have been tried" - Prof George Yarrow, Three Lectures on Privatization, Jagiellonian University, Krakow, April 1990

"And if there's one thing we've learned about flawed markets, it's that people flee from them, either physically or by resorting to back channels and black markets. Either way, flawed markets can undermine not just communities but whole nations" - Alvin Roth, Who Gets What - and Why, 2015

"Economic controversy is generally a thankless task. You cannot hope to make any impression on your opponent. Yet he is the only reader on whose interest you can count" - Francis Ysidro Edgeworth, Economic Journal, 1898

"There is some evil genius which sits at the elbow of every economist, forcing him into all sorts of contorted and unnecessary complications" - John Maynard Keynes, letter to Roy Harrod, August 1935

"We are here and it is now. The way I see it is, after that, everything tends towards guesswork" - the philosopher Didactylos, in Terry Pratchett's Small Gods, 1992

"I have never yet seen any plan which has not been mended by the observations of those who were much inferior in understanding to the person who took the lead in the business" - the blogger's creed, as foreshadowed by Edmund Burke, Reflections on the Revolution in France, 1790

"They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves" - advice to Twitterati, as foreshadowed by Adam Smith, An Inquiry Into The Nature and Causes of the Wealth of Nations, Book IV, 1776